The Historical Returns for the Past Four Years for Stock

question 56

Multiple Choice

The historical returns for the past four years for Stock C and the stock market portfolio are Stock C: 10 percent, 30 percent, 20 percent, 20 percent; market portfolio: 5 percent, 15 percent, 25 percent, 15 percent. Calculate the beta of Stock C.

• A)0.86
• B)0.50
• C)1.50
• D)0.38

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Definitions:

Standard Deviation

An appraisal of the diversity or spread level exhibited by a collection of figures.

Normally Distributed

Refers to a probability distribution which is evenly shaped around the mean, indicating that occurrences of data close to the mean are more common than occurrences of data distant from the mean.

Mean

The average of a set of numbers, calculated by dividing the sum of these numbers by their quantity.

Standard Deviation

A method to assess how much the values in a dataset diverge from one another.